G.S.P. + & M.F.A.

A Government official likened the current G.S.P. + crisis to the situation that existed immediately prior to the withdrawal of the Multi Fibre Arrangement (M.F.A.),where prophets of doom predicted the worst, but the garment industry proved otherwise.
Central Bank of Sri Lanka (C.B.S.L.) Governor Ajith Nivard Cabraal told reporters on Thursday that the upturn in the economy after the war end, complemented by a low interest rate and inflationary regimes, were fillips that were no that there earlier, which may help Sri Lanka’s exports to the E.U. region to be still competitive in the event the G.S.P. + facility is lost.
Quoting statistics, Cabraal said that this duty concession amounted to 6-7%. Apparel, the biggest beneficiary from this scheme, enjoyed a euro 78 million concession last year as a result of this facility, with 66% of apparel exports to the E.U. having had gained entry to that market under that scheme.
G.S.P. + theoretically allows Sri Lanka to export over 7,000 items to the E.U. on a duty free basis. However Sri Lanka risks losing this concession midway on account of alleged human rights abuse. The E.U. has given Colombo time till Friday to explain itself on this issue. The concession officially ends on December 31, 2011.
Garments, Sri Lanka’s largest foreign exchange earner have been the biggest beneficiary from the G.S.P. + scheme. The now defunct M.F.A. allowed countries like Sri Lanka to export garments to the E.U. and U.S.A. on a quota basis.
First to abolish the quota system was the E.U., which was followed by the U.S.A. from January 1, 2005. The U.S.A. at that time was Sri Lanka’s largest export market. Many felt that the garment industry would not be able to survive after the U.S.A. withdrew this facility.
But subsequent events proved otherwise. At present E.U. is Sri Lanka’s single biggest export market, followed by the U.S.A.